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UWI think tank fears for economy in Iran aftermath

by Barbados Today
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Dr Don Marshall

Sharp increases in global oil prices could jeopardise any economic gains from Barbados’ homegrown belt-tightening programme and weaken the stability of its foreign reserves, the head of a University of the West Indies think tank has warned.

A conflict between Iran and the United States would expose glaring flaws still existing in the national economy, said Dr Don Marshall, the director of the UWI’s Sir Arthur Lewis Institute of Social and Economic Studies.

The most worrying weakness, said Dr Marshall, is the island’s high fuel import bill, which would climb even higher with increased oil prices and affect various sectors of the Barbados economy.

Dr Marshall declared: “It would be disastrous if we ever get back to a situation where the price of oil touches US 90 dollars a barrel, not just for Barbados but also for other Caribbean economies.

“Everything that we import would be affected in terms of the higher cost to the merchants and that cost would be passed on to us as consumers so we would experience further strain and hardship and it would compound the strain that Barbadians would be undergoing in relation to the current austerity programme.”

The political economist explained that while the country’s debt restructuring under the International Monetary Fund (IMF) has shielded the dollar from devaluation, it has still not been able to address the challenges faced by a largely stagnant economy in which “we import everything”.     

“The bugbear of the Barbados economy is how dependent we are on the purchase of fuel, medicine and food, and while we have tackled the debt servicing challenge, one of Barbados’ other troubling features is the undiversified economy linked to its very dependent relationship with the importation of foreign goods,” contended Dr Marshall.

The distinguished academic believes not even the promise of large tourism and construction projects in the new year are capable of correcting the problem because “we do not manufacture a nail or a glass”.

He suggested Barbadians should be thankful that tensions between the two global powerhouses appear to be cooling down, as it could possibly affect tourism and international travel, if threats like terrorism increase.

Dr Marshall said: “We can’t take comfort in saying that our source market is British and such problems would only affect Americans.

“We should note that a great deal of our tourist traffic comes from fellow Barbadians living in the U.S and Canada and they will be spooked about travelling.

“In a year where we are seeking to invite more Barbadians to return to our shores outside of the norm, we don’t want this to occur.

“The British also will not travel if they are spooked because if it escalates, the reaction could range from high-intensity war to low intensity acts of terrorism.”

On Sunday, Prime Minister Mottley said she was closely monitoring tensions between Iran and the US.

While admitting the country could not do much to shield itself from those types of external shocks, she promised to push ahead with Government’s 2020 initiatives.

Dr Marshall added: “We are not in control of our own affairs because we are part and parcel of the globe, so there is no such thing as an exogenous shock of a terrorist act or of prices going up or an imperial war.

“These things are part of the interplay and contest among imperial powers and the impact that that has.

The battle for control in the Middle East is one that extends beyond the two protagonists right now in Iran and the US and the Prime Minister is right that these contests are largely beyond our control.”

But he suggested that small Caribbean countries must strategically turn threats into opportunities by bargaining and lobbying as a united front.
kareemsmith@barbadostoday.bb

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